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Ironwood Pharma to Split in Two, Forming New Rare Disease Biz

Ironwood Pharmaceuticals (NASDAQ: IRWD) is making the unusual move of splitting up into two separate, publicly traded companies. One, which will keep the Ironwood name, will focus on selling its three commercial drugs and developing two experimental ones. The other, yet to be named, will be a R&D firm working on a pipeline of earlier stage therapies.

The 20-year-old Cambridge, MA-based firm has not been consistently profitable, but in a statement this morning, Ironwood said that by focusing on growing its commercial business—and hiving off the bulk of its drug research—it hopes to become profitable by 2019.

Ironwood has three approved drugs: linaclotide (Linzess), for irritable bowel syndrome and constipation; and two gout drugs, lesinurad (Zurampic) and another version of it sold as Duzallo. But Ironwood only has partial rights to both of them, and spent heavily on internal research as it began developing drugs for a variety of diseases, like sickle cell disease and heart failure. In 2017, for instance, Ironwood got about $258 million of the $701 million total U.S. sales of linaclotide, spent $148 million on R&D, and suffered a $117 million net loss. It has burned through $1.3 billion since its inception.

After the split, Ironwood will d keep its three marketed products, along with an experimental drug for gastroesophageal reflux disease that will start Phase 3 testing this year and an extended release version of linaclotide.

The new R&D firm will develop drugs for rare and other diseases, taking on several development programs, including the heart failure and sickle cell drugs. The new company will license out the therapies being developed for more common disorders.

The two companies will have separate boards and management teams, though Ironwood hasn’t shared details yet. They’ll also both be based in Cambridge. In a statement, the company said the deal will create “two nimbler, more productive businesses” with “specifically tailored capital allocations.”

Ironwood shares climbed 5 percent, to about $19 apiece, in midday trading on Tuesday. Here’s more onthe company and its strategy over the years.

Ben Fidler contributed to this article.

Corie Lok is Special Projects Editor with Xconomy in Boston. You can reach her at clok@xconomy.com. Follow @corielok